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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                   FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997

                                      OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    For the transition period from      to


                         COMMISSION FILE NUMBER 0-27022

                           OPTICAL CABLE CORPORATION
             (Exact name of registrant as specified in it charter)

       Virginia                            54-1237042
(State of incorporation)                   (I.R.S. Employer Identification No.)


          5290 Concourse Drive             (540) 265-0690
        Roanoke, Virginia 24019            (Telephone Number)
(Address of principal executive offices)


Securities registered pursuant to Section 12(b) of the Act:

                                     None

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, no par value


     Indicate  by  checkmark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. (1) Yes [X] No [ ]  (2) Yes [X] No [ ]

     Indicate by checkmark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The aggregate market value of shares of common stock held by non-affiliated
at January 15, 1998 was $24,444,504.


     As of January 15, 1998,  38,559,288 shares of the Registrant's Common Stock
were outstanding.


                      DOCUMENT INCORPORATED BY REFERENCE

Portions of Optical Cable Corporation's  definitive Proxy Statement for its 1998
Annual  Meeting of  Shareholders  to be filed with the  Securities  and Exchange
Commission  pursuant to Regulation 14A under the Securities Exchange Act of 1934
(the "Proxy Statement") are incorporated by reference into Part III of this Form
10-K.

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<PAGE>

                                     PART I

ITEM 1. BUSINESS

GENERAL

     The Company  manufactures  and markets a broad range of fiber optic  cables
for "high bandwidth"  transmission of data, video and audio  communications over
moderate  distances of up to approximately 10 miles. The Company's cables can be
used both indoors and outdoors,  are easy and economical to install, and provide
a high degree of reliability.  The Company believes that its products are widely
accepted  for  use  in  fiber  optic  local  area  networks   ("LANs")  and  are
increasingly  accepted  in  other  communications  applications.  The  Company's
products directly address the needs of the moderate distance market by utilizing
a tight-buffered coating that protects the optical fiber and a cable design that
achieves superior mechanical and environmental performance.


     The Company was  incorporated in Virginia in 1983. The Company's  executive
offices are located at 5290 Concourse Drive, Roanoke,  Virginia 24019, telephone
number (540) 265-0690.


INDUSTRY BACKGROUND AND MARKETS

   Application of Fiber Optic Communications Technology

     Fiber optic  technology was developed in the mid-1970s as a  communications
medium offering numerous technical  advantages over metallic  conductors such as
copper.  Optical fiber is an ultrapure glass structure that has been pulled into
a hair thin strand. Optical fiber's advantages include its high bandwidth, which
permits reliable  transmission of complex signals such as multiple  high-quality
audio and video channels, high-speed data formats such as Fiber Distributed Data
Interface   ("FDDI")  and   Asynchronous   Transfer  Mode  ("ATM"),   other  LAN
transmissions, and high-definition television. Relative to copper, optical fiber
has thousands of times the  information  carrying  capacity,  occupies much less
space and operates  more  reliably over greater  distances.  Furthermore,  it is
immune to the  electromagnetic  interference  that causes  static in copper wire
transmission,  as well as to electrical  surges.  Because optical fiber does not
carry electricity, it is a safer choice in flammable environments. Additionally,
communicating  through  optical fiber is more secure than copper because tapping
into fiber optic cable without  detection is very difficult.  Optical fiber also
enjoys technical  advantages over other  communications  media such as satellite
and  microwave   communications,   particularly  in  applications  over  shorter
distances.

     Because  most of the world's  information  storage,  reception  and display
systems (such as  computers,  telephones  and  televisions)  are  electronically
based, various electro-optical  hardware components must be attached to each end
of an optical  fiber.  For instance,  a laser or light  emitting  diode converts
electrically  encoded  information  into light  signals,  which  travel over the
optical  fiber to the  terminal  point of  reception.  At the  terminal  point a
photodetector  converts the information back to its original form. Other passive
optical  components such as optical connectors and splices facilitate the travel
of  a  light   signal  from  one   optical   fiber  to  another  or  to  another
electro-optical  component,  while  couplers  and  splitters  combine  or divide
signals, thereby permitting simultaneous  distribution of information to or from
multiple locations. Despite early and widespread appreciation of optical fiber's
superior  technical  characteristics,  until the late 1970s the costs associated
with  the  necessary   electro-optical   transmitters  and  receivers   rendered
commercial applications prohibitively expensive.

     The Company believes there is a perception that fiber optic cable,  because
it is different  from copper cable,  is difficult to install and maintain.  This
perception  is being  overcome as fiber optic cable is more widely  used.  Also,
like copper cable,  fiber optic cable is restricted to  applications in which it
is possible  to lay cable  between  the point of  transmission  and the point of
reception. Wireless communication media do not have this limitation.


                                       2
<PAGE>
   The Long Distance Telephone Market

     In the 1970s private  industry  began to develop  optical fiber systems for
long distance commercial applications, particularly the U.S. telephone networks.
For this application,  the expense of  electro-optical  components posed a lower
cost barrier because  relatively few terminal  components were required for long
distance  transmissions.  For the long distance telephone market,  "single mode"
optical fiber was developed.  To protect this early  generation of fiber without
adversely affecting its optical performance, fiber optic cable producers chose a
high density  (i.e.,  high fiber count)  "loose tube" cable  construction.  This
cable design was developed to put minimal  stress on the optical  fibers,  which
initially were particularly  fragile, and to put many optical fibers in a small,
relatively  inexpensive  cable.  When such  cables  proved  vulnerable  to water
penetration, manufacturers added a water-blocking but flammable gel, making them
unsuitable for indoor use.

     Once fiber optic  technology  achieved cost parity with copper for the long
distance  telephone  application,   U.S.  long  distance  carriers  aggressively
installed  fiber  optic  routes  across the United  States.  By the late  1980s,
optical fiber constituted nearly all of the long distance telephone network,  as
well as the interoffice  local exchange  network  connecting  central  telephone
offices in the same area.


   The Moderate Distance Market

     In the 1970s  the U.S.  government  made  available  substantial  funds for
research and  development  to  determine  the  viability  of optical  fiber as a
solution to critical  communications  problems  faced by the  military and other
agencies.  In the course of addressing these challenging,  multiple  termination
point applications,  which were predominately over moderate distances, engineers
achieved  significant   technological   advances.  Such  advances  included  the
introduction   of   "multimode"   optical  fiber  and  the   development  of  an
easy-to-handle  "tight-bound"  cable  structure  that afforded the optical fiber
effective  protection against mechanical shock, water,  extreme temperatures and
other stresses likely to be encountered in a battlefield environment.

     High levels of production of optical  fiber,  cable and  components for the
long  distance  telephone  market  since the  mid-1980s  have  resulted  in cost
reductions  that make fiber  optic  cable  economically  feasible  for a growing
number of potential customers with moderate distance business application needs.
Such applications include data communications,  LANs, telecommunications,  video
transmission,  including cable television, and military tactical communications.
Particularly in data  communications,  high performance,  rugged, and survivable
fiber  optic  cable is well suited and has become  economically  attractive  for
diverse and often unpredictable installation environments.  The Company believes
that the LAN market is  particularly  attractive.  LANs are often  installed  at
corporate  offices,  hospitals,  utilities,  academic  campuses,  factories  and
transportation management facilities.

     The  increasing   standardization  of  communications  technology  and  the
increasing  demand for high bandwidth  (i.e.,  high data capacity or volume) are
expected to  facilitate  optical  fiber's  further  penetration  of the moderate
distance market  presently  served by copper cable.  Fiber optic cable is better
able to maximize the utility of emerging LAN interface  standards,  such as FDDI
and ATM, and has  therefore  become a preferred  data  transmission  medium.  In
addition, high speed, high bandwidth  applications,  such as video conferencing,
imaging and Internet  access,  are growing and are driving  increased demand for
fiber optic cable in moderate distance applications.

     With the movement  toward  deregulation  and  competition,  the large cable
television  companies,  often  referred to as  Multiple  System  Operators,  the
Regional Bell Operating Companies ("RBOCs"), and other independent long distance
carriers are competing to provide  enhanced  cable  television,  data, and other
information  highway  services to homes and businesses.  Many of these companies
are conducting  field trials of optical fiber systems in the portion of the U.S.
telephone  networks which lies between telephone  companies' central offices and
subscribers'  offices and homes (the "subscriber loop"). To date, the subscriber
loop remains  overwhelmingly  copper.  Because the  subscriber  loop  represents
approximately  90% of the U.S.  telephone  system  (measured  by total length of
cable),  the potential  demand for fiber optic cable in this application is very
large, provided that cost parity with copper cable systems can be achieved.


                                       3
<PAGE>
THE COMPANY'S SOLUTION

     Fiber optic cables used for moderate distance applications may be subjected
to many different stress environments.  Cables installed inside buildings may be
routed  through cable trays,  floor ducts,  conduits and walls and may encounter
sharp  corners or edges.  They may be pulled  without  lubricant,  resulting  in
higher pull tensions, and stressed to the breaking point if care is not used. In
the  outdoor  and  underground  environments,  cables  are  often  subjected  to
moisture,  ultra-violet  radiation and long pulling  distances  through conduits
with a variety of bends and corners,  resulting in high pulling tensions.  These
conditions  can be aggravated if installers  are not  adequately  trained in the
installation of fiber optic cable. The Company's  founders  recognized that, for
many applications, the stresses on the cables during installation are similar to
those in the military tactical  environment,  for which the Company's technology
was  initially  developed.  The Company  applied this  technology  to commercial
products  serving a market that could not be  adequately  served by  gel-filled,
loose tube cable manufactured for the long distance telephone market.

     The Company  believes that nearly one-half of the fiber optic cable sold in
the moderate  distance  market today is the gel-filled,  loose tube type,  which
requires  careful  installation  and extensive  preparation for termination with
connectors.  While this cable  design  has  served the long  distance  telephone
market  reasonably well, it was not designed to withstand the stress that cables
undergo  during  installation  in  the  LAN  or  subscriber  loop  environments.
Gel-filled,  loose tube  cables are  difficult  to  terminate  with  connectors,
because they cannot be  mechanically  attached  directly to the cable's  optical
fibers.  Designed  for long,  straight  outdoor  runs,  the cables are stiff and
difficult  to place in  complex  installations  and are  flammable  and thus not
suited for indoor use. When used for indoor/outdoor installations,  these cables
must be spliced near the building  entrance to flame  retardant  cables suitable
for indoor use, adding cost and complexity and reducing reliability.  Therefore,
the total  installed cost of  gel-filled,  loose tube cables is high in moderate
distance applications.

     In  contrast,  the  Company's  products  address the needs of the  moderate
distance market by utilizing a tight-buffered  coating that protects the optical
fiber and a cable design that achieves  superior  mechanical  and  environmental
performance.  The  Company's  products  are derived from  technology  originally
developed for military applications requiring very rugged,  flexible and compact
fiber optic cables.  Unlike gel-filled  cables, the Company's cables may be used
indoors and outdoors,  are flame  resistant,  flexible,  easy and  economical to
install,  and provide a high degree of  reliability.  The Company  believes that
because of these  features,  its products  are widely  accepted for use in fiber
optic LANs and are increasingly accepted in other applications.


THE COMPANY'S STRATEGY

     The Company's  primary  strategy is to capitalize on its proprietary  cable
manufacturing  processes and  technologies  to provide a  comprehensive  line of
versatile fiber optic cables with superior features and competitive pricing that
appeals  to  the  large,   diverse  and  growing   market  for  high   bandwidth
communications over moderate distances.

   Focus on the Moderate Distance Market

     Optical fiber has become an accepted  medium for the  transmission of data,
video and audio in moderate  distance  applications in cities,  factories,  high
rise  buildings,  and on  campuses.  High  speed,  high  bandwidth  applications
deployed in LAN  environments  are growing in both large and small  corporations
and are driving  increased  demand for optical fiber.  Increasing  deployment of
multimedia  systems  on LANs that  utilize  protocols  such as FDDI and ATM also
enhances the demand for bandwidth.

     The Company's products address the needs of the moderate distance market by
utilizing a  tightbuffered  coating that  protects the optical fiber and a cable
design that achieves  superior  mechanical and  environmental  performance.  The
Company  believes  that because of the  outstanding  features of its fiber optic
cable,  including  suitability  for indoor and outdoor use, easy and  economical
installation  and a high degree of  reliability,  the  Company's  products  have
become well established for optical fiber LANs and are increasingly accepted for
other applications.


                                       4
<PAGE>
   Develop High Performance Products and Offer a Broad Product Line

     The Company  believes  that  serving both the premium  performance  and the
price  competitive  parts of the  moderate  distance  market best  utilizes  its
development and manufacturing  capabilities.  The Company's  Ultra-FoxTM product
line  provides  optical  fiber  products  that are  competitively  priced,  with
features that the Company believes are superior to its  competitors'  offerings.
The Ultra-FoxTM plus product line shares many of the materials and features with
the Company's  military tactical cable products and is marketed to customers who
want the most reliable installations for their critical communication or control
processes.  Since March 1994, the Company's  quality  management system has been
certified to the internationally recognized ISO 9001 quality standard. 


   Leverage Existing Technologies and Knowledge

     The  Company  has  extensive  expertise  in  optical  fiber  packaging  and
applications  design,  which  it  utilizes  for new  products.  The  Company  is
responsive to, and works to anticipate the requirements  of, its customers.  Its
expertise with tight-buffered  cable technology  facilitates  development of new
products and variations of existing products.  Products that are developed for a
special application also may be introduced to the broader market.


   Capitalize on Proprietary, Flexible Manufacturing Processes

     The   Company   believes   that  its   customized,   internally   developed
manufacturing  processes  provide  a  competitive  advantage.  The  Company  has
developed   proprietary  process  control  systems  to  ensure  consistency  and
uniformity at high  throughput  rates and intends to continue the upgrade of its
manufacturing  capability.  Through construction  completed in January 1997, the
Company expanded its facilities to increase its  manufacturing  capacity.  Ample
capacity,  versatile  production  processes  and a broad range of  products  are
intended to enable the Company to be flexible and responsive to customer needs.


   Offer Cost Effective Solutions to its Customers

     The  Company  believes  that its  products  are  rugged,  easy to  install,
versatile  and  highly   reliable,   making  them  attractive  to  distributors,
installers,  and most importantly,  end users.  Because the Company's cables are
multipurpose,   distributors  can  stock  fewer  varieties  and  therefore  less
quantities of cable.  For installers and systems  integrators,  the multipurpose
feature can significantly  reduce  installation costs by eliminating the need to
transition from indoor cable to outdoor cable at a building entrance.  This also
enhances  reliability by eliminating splices and possible high stress on optical
fibers that could lead to breakage. This simplified installation, lower cost and
enhanced  reliability  are also valued by the end user,  because a long lasting,
trouble-free  cable is the basis for minimizing down time and maximizing  system
availability.


   Expand Distribution and Marketing Presence

     The Company  intends to increase its sales and  marketing  activities  both
domestically and  internationally.  The Company distributes its products through
independent  distributors  to  supplement  the Company's  existing  distribution
channels and to provide the Company with access to a greater number of potential
customers  in  the  United  States.   Revenues  from  international  sales  were
approximately 24%, 25% and 27% in fiscal 1995, 1996 and 1997, respectively.  The
Company  intends  to  hire  more  sales  personnel  to  manage  and  expand  its
international  distribution network. However, there can be no assurance that the
Company  will have the  financial  resources  required to increase its sales and
marketing  activities  domestically  or  internationally,  or to hire additional
sales personnel. 


                                       5
<PAGE>

PRODUCTS AND TECHNOLOGY


   Products

     The Company  manufactures  and markets a broad range of fiber optic  cables
that  provide  a  high  bandwidth   transmission   for  data,  video  and  audio
communications over moderate distances.  The Company's products are derived from
technology originally developed for military applications requiring very rugged,
flexible and compact  fiber optic  cables.  The  Company's  method of applying a
tight-buffered  coating on each  optical  fiber  before it is encased  minimizes
microbending, the primary cause of signal loss in optical fibers.

     The Company has  pioneered a  pressure-extrusion  technique  for applying a
cable jacket  directly  over the fiber optic cable core  elements,  resulting in
high cable tensile strength and lateral stress  resistance.  Such  Core-LockedTM
jackets  allow the cable to  operate  as a single  mechanical  unit,  maximizing
resistance  to tears  during  installation  pulls  through  narrow  spaces.  The
Company's product line is deliberately diverse and flexible, in keeping with the
evolving  application  needs within the moderate  distance  market.  Most of the
Company's  cable  designs are  available  in both the  Ultra-FoxTM  Plus premium
product and the  Ultra-FoxTM  highly  featured but cost  competitive  commercial
product.






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                                       6
<PAGE>


<TABLE>
<CAPTION>
        PRODUCT TYPE                     FEATURES/DESCRIPTION                         APPLICATIONS
-----------------------------   ---------------------------------------   -------------------------------------
<S>                             <C>                                       <C>
A-Series Simplex and Duplex     o simplex (one optical fiber) and         o short "patch cord" cables
 "Assembly" Cables                duplex (two optical fibers) cables      o links between electronic
                                o tight-buffered coating on each            equipment and main fiber optic
                                  optical fiber                             cable
                                o aramid yarn strength members            o routing connections in patching
                                o thermoplastic outer jacket                systems
                                o flame retardant                         o indoor use

B-Series "Breakout" Cables      o 2 to 156 optical fibers                 o direct termination with connectors
                                o tight-buffered coating on each            on each optical fiber
                                  optical fiber                           o short and moderate distance links
                                o elastomeric jacket encases each           between buildings or within a
                                  optical fiber and surrounding ara-        building, where multiple termina-
                                  mid yarn strength members (simi-          tion points are needed
                                  lar to an A-Series simplex cable)       o installations where ease of termi-
                                o Core-LockedTM outer jacket                nation and termination cost are
                                o rugged                                    important factors
                                o flame retardant                         o indoor and outdoor use
                                o moisture and fungus resistant

D-Series "Distribution"         o 2 to 156 optical fibers                 o longer distance runs where size
 Cables                         o tight-buffered coating on each            and cable cost are more significant
                                  optical fiber                           o can be armored for additional pro-
                                o Core-LockedTM outer jacket                tection in buried and overhead in-
                                  encases the optical fibers and            stallations
                                  aramid yarn strength members            o indoor and outdoor use
                                o smaller, lighter and less expensive
                                  than the B-Series cable
                                o high strength to weight ratio
                                o compact size
                                o rugged
                                o flame retardant
                                o moisture and fungus resistant

G-Series "Subgrouping"          o up to 864 optical fibers in various     o high fiber count systems
 Cables                           subgroup sizes                          o subgroups needed to facilitate
                                o multi-fiber subcables, each similar       organization of large numbers of
                                   to a D-Series cable                      optical fibers
                                o Core-LockedTM outer jacket              o subcables routed to different
                                  surrounds subcables                       locations
                                o high density "micro" construction       o installations requiring several
                                o rugged                                    different optical fiber types
                                o flame retardant                         o indoor and outdoor use
                                o moisture and fungus resistant
</TABLE>

                                       7
<PAGE>
     A-Series Simplex and Duplex  "Assembly"  Cables.  Simplex and duplex cables
are round single fiber and "zip cord" two-fiber structures,  respectively.  Both
cables contain tight-buffered optical fibers, aramid yarn strength members and a
thermoplastic  outer jacket for each fiber.  They are used for "jumpers"  (short
length patch cords) and for "pigtails"  (short lengths of cable with a connector
on one end). Various outer jacket materials are offered to provide  flammability
ratings and handling  characteristics tailored to customers' needs. These cables
are  often  privately  labeled  and  sold to  original  equipment  manufacturers
("OEMs") who produce the cable assemblies.

     B-Series  "Breakout"  Cables.  The B-Series  cables  consist of a number of
subcables,  each  consisting of a single  optical fiber and aramid yarn strength
members similar to an A-Series simplex cable. These subcables are tight-bound in
a pressure-extruded, high performance Core-LockedTM PVC outer jacket to form the
finished multi-fiber cable. Like the A-Series cables, the subcables are intended
to be terminated directly with connectors. This direct termination feature makes
this cable type particularly  suited for shorter distance  installations,  where
there are many  terminations  and termination  costs are more  significant.  The
materials  and  construction  of the  cable  permit  its use  both  indoors  and
outdoors.  These  features  make the cable cost  effective for use in campus and
industrial complex installations, between and within buildings.

     D-Series "Distribution" Cables. The Company's D-Series cables are made with
the same  tight-buffered  optical fiber and high performance  Core-LockedTM  PVC
outer jacket as the B-Series  cable.  Unlike the B-Series cable,  however,  each
tight-buffered  optical fiber in a D-Series cable is not covered with a separate
subcable  jacket.  D-Series cable is intended for longer distance  applications,
where  termination  considerations  are less  important and often traded off for
size,  weight and cost. The  tightbuffered  optical fiber and  Core-LockedTM PVC
outer  jacket  make  D-Series  cables  rugged  and  survivable,  with  a  small,
lightweight  configuration.  The high  strength to weight  ratio of these cables
makes them well suited for  installations  where long  lengths of cables must be
pulled through duct systems.  D-Series cable is used in relatively longer length
segments of installations.

     G-Series  "Subgrouping"  Cables.  This  cable  design  combines a number of
multi-fiber  subcables,  each  similar to a  D-Series  cable.  Each  multi-fiber
subcable  is  tight-bound  with  an  elastomeric  jacket,   providing  excellent
mechanical and  environmental  performance.  These  subcables are contained in a
pressure extruded,  high performance  Core-LockedTM PVC outer jacket to form the
finished  cable.  This design permits the  construction of very high fiber count
cables.  These cables may be used where  groups of optical  fibers are routed to
different locations.  The Company has fabricated a developmental sub-group cable
containing over 1,000 fibers  intended for high density,  moderate length routes
such as urban telephone distribution systems.

     Other Cable Types.  The Company produces many variations on the basic cable
styles  presented  above  for  more  specialized   installations.   For  outdoor
applications,  both  the  B-Series  and  D-Series  cables  may be  armored  with
corrugated  steel  tape  for  further  protection  in  underground  or  overhead
installations.  For overhead  installations on utility poles, the Company offers
several self-supporting versions of the D-Series cables, with higher performance
outer jackets.  One contains additional aramid yarn strength members, to support
its weight  with wind and ice loading  over long  unsupported  lengths.  Another
style has a separate  strength  member,  either metallic or  non-metallic,  in a
figure eight  configuration,  to reduce installation costs. The Company's cables
are available in several  flammability  ratings,  including  "plenum" for use in
moving air spaces in buildings,  and "riser" for less critical  flame  retardant
requirements.  "Zero halogen"  versions of the B-Series and D-Series  cables are
available  for use in enclosed  spaces  where there is concern  over  release of
toxic gases during fire. Composite cables combining optical fiber and copper are
offered to facilitate the transition from  copper-based  to optical  fiber-based
systems without further installation of cable.


   Product Development

     The  Company  continues  to develop  enhancements  to its fully  automated,
computer-controlled  production  processes  that it  believes  increase  product
quality and reduce costs. Many of the Company's  technological  advances are the
result  of  refinements   and   improvements   made  during   production   runs.
Occasionally, potential customers contact the Company to develop new products or
modified product


                                       8
<PAGE>
designs  for  them,  which  ultimately  may  appeal  to  other  customers.   The
development  costs  associated  with new products and modified  product  designs
requested by the customer are included in the price charged to that customer. By
utilizing these new products and modified product designs, the Company continues
to improve its product line with minimal  direct  expenditures  for research and
development.


MAJOR MARKET APPLICATIONS

     The most common  application  of the Company's  products is in LANs,  where
optical fiber is widely used as the "backbone" or "trunk,"  connecting groups of
work stations and central file servers. In its typical implementation, the fiber
optic cable may be installed between wiring closets in a building,  or installed
between  buildings in a multi-building  complex.  Fiber optic cable runs between
electronic equipment that combines the signals of many workstations. Because the
combined signals may carry a large volume of critical  information,  fiber optic
cable,  which  is  immune  to  electrical  interference,  is often  desired.  In
comparison,  copper  wires  carry  less  information,  or  the  same  amount  of
information  for a shorter  distance,  in either case  remaining  susceptible to
electrical noise and  interference.  The following are typical  applications for
the Company's fiber optic cable:

     Office Facilities. Banks, stock trading companies, insurance companies, and
other  businesses  often  have a need to  distribute  information  among a large
number of work stations, have time-critical data and would incur severe costs as
a result of system  failures.  A LAN connected with fiber optic cable has in the
past several years been an increasingly  common way of  implementing  management
information systems for these businesses.

     Educational  Institutions.  Colleges and universities  have been leaders in
implementing  large  fiber  optic  networks.  More  recently,  many  states have
undertaken  large scale  projects to install  networks in high  schools and even
grade schools.  These systems link personal computers with central file servers.
As interactive learning systems require increased  transmission speeds,  optical
fiber becomes a logical medium.

     Manufacturing  and Mining  Facilities.  Manufacturing and mining facilities
are typically  not air  conditioned,  are less clean and  otherwise  have a less
controlled  environment  than  businesses  generally.  They often  contain heavy
electrical equipment, which causes electromagnetic  interference if conventional
copper cable is used.  The  advantages of fiber optic cable in this  environment
include immunity to electrical  noise,  ruggedness,  high  information  carrying
capacity and greater distance  capability.  The Company's products are installed
in  automotive  assembly  plants,  steel plants,  chemical and drug  facilities,
petroleum refineries, mines and other similar environments.

     Health Care  Facilities.  Hospitals  have extensive data transfer needs for
medical records, patient monitoring,  inventory,  billing and payroll functions.
More recently,  the transfer of electronically stored images of x-rays, MRIs and
CAT scans has  increased  to  facilitate  analysis  and  diagnosis  at  multiple
locations. These applications require high data transfer rates. Optical fiber is
a preferred  solution,  especially in  electromagnetic  environments  with heavy
electrical equipment such as x-ray machines.

     Traffic   Control   Systems.   Traffic  system   applications   range  from
surveillance  and control of traffic flow in cities to  installation of sensors,
automatic  toll  collection,  video  monitoring  and control of signs in "smart"
highway  programs.   These  applications  often  require  transmission  of  high
bandwidth  signals such as video  monitoring,  for which  optical  fiber is well
suited. The Company's cables offer ruggedness,  reliability and cost savings for
termination  in systems that are near the vibrations of traffic and require many
termination points.

     Telephone  Companies.  The Company has worked with several  RBOCs for their
business customers' requirements.  As high bandwidth services of the information
highway  are  brought  closer to more homes and  businesses,  the  bandwidth  of
optical fiber becomes more important.


SALES, MARKETING AND CUSTOMER SERVICE

     The  Company's  products  are sold to end  users,  electrical  contractors,
system  integrators,  value-added  resellers  ("VARs"),  OEMs and  distributors.
Distribution  methods are adapted to the particular  needs of different types of
customers. The decision to purchase the Company's products may be made


                                       9
<PAGE>
by end  users,  distributors,  electrical  contractors,  system  integrators  or
specialized  installers.  The Company attempts to reach these decision makers by
advertising in fiber optics trade journals and other  communications  magazines.
The Company also participates in numerous domestic and international trade shows
attended by customers and prospective  customers.  International  sales are made
primarily through foreign distributors, system integrators and VARs.

     The   Company's   field  sales  force   consists   of   independent   sales
representatives  located in various  geographic  areas.  The field  sales  force
provides  sales  support  for  distributors,  system  integrators  and  VARs and
communicates with the customer's purchase decision makers. The field sales force
is  supported  by inside  sales  personnel  and  supervised  by  regional  sales
managers.  The inside sales group provides quotations and customer service.  The
regional sales managers  provide  on-site sales support with major customers and
are  responsible  for  major  customers  and  opportunities.  For more  in-depth
technical  support,  the sales group has access to engineering,  quality control
and  management  personnel who have  extensive  fiber optic cable  expertise and
industry experience.

     Furthermore,  the Company  believes  that it has a  reputation  for product
excellence  based on its  success  with  large  projects  for end users  such as
Chrysler  Corporation,  3M, Virginia Polytechnic Institute and State University,
Bankers Trust and Salomon  Brothers Inc, and for  integrators  such as Ameritech
Information  Systems  and US WEST.  The  Company  had no  single  customer  that
accounted  for more  than 5% of its net  sales  in  fiscal  1995,  1996 or 1997.
However, in fiscal 1997, 22% of net sales was attributable to two major domestic
distributors, and in fiscal 1996, 12% of net sales was attributable to one major
domestic distributor. Most of the Company's revenue in each quarter results from
orders received in that quarter.  Accordingly, the Company does not believe that
its backlog at any particular  point in time is indicative of future sales.  The
Company  believes that its customer base is diverse,  crossing over many markets
and regions  worldwide  and  believes  that it is  important  to  maintain  that
diversity to avoid  dependence on any particular  segment of the economy or area
of the world. 


MANUFACTURING AND SUPPLIERS

     The Company's manufacturing operations consist of applying a variety of raw
plastic materials to optical fibers.  The key raw material in the manufacture of
the Company's products is optical fiber,  which the Company currently  purchases
from four  manufacturers.  The  Company  works with its  vendors in an effort to
ensure a  continuous  supply.  The Company  utilizes two sources for the cable's
aramid yarn  strength  member and several  suppliers of coating  materials.  The
Company has not experienced difficulty in arranging alternate sources. All other
raw materials have at least one backup source.

     The Company  believes that by  maintaining a consistent  relationship  with
suppliers, it can obtain better quality control and emergency deliveries.  Being
able to deliver  product on time has been an important  factor in the  Company's
success.  To date, the Company has been able to obtain adequate  supplies of its
raw materials in a timely manner from existing sources or, when necessary,  from
alternate sources.  However, any disruption in the supply of raw materials could
adversely  affect the Company's  cable  production  capability and its operating
results.

     The Company believes that other fiber optic cable  manufacturers  generally
carry minimal amounts of raw materials and finished goods inventory. The Company
generally  holds raw materials and finished goods  inventory in amounts  greater
than  that of its  competitors  to ensure a quick  response  after  receiving  a
customer's order.

     The Company believes its quality control  procedures have been instrumental
in achieving  the  performance  and  reliability  of its  products.  The Company
produces cable using the quality control  procedures of MIL-I-45208 (the primary
standard applicable to most government purchasers of cable).

     Since  March  1994,  the  Company's  quality  management  system  has  been
certified to the internationally  recognized ISO 9001 quality standard. ISO 9000
is a  series  of  standards  agreed  to by the  International  Organization  for
Standardization  (ISO).  ISO  9001 is the  highest  level of  accreditation  and
includes  an  assessment  of 20  elements  covering  various  aspects  of design
development, procurement, production, 

                                       10
<PAGE>
installation and servicing.  The Company's certification was obtained through an
audit by a qualified  international  certifying agency. In order to maintain its
certification, the Company must continue to comply with the standards.


PROPRIETARY RIGHTS

     None of the  Company's  current  manufacturing  processes  or  products  is
protected  by patents.  The Company  relies on a  combination  of trade  secret,
copyright and trademark law, nondisclosure  agreements and technical measures to
establish and protect its rights pertaining to its production  technology.  Such
protection  may  not  deter   misappropriation  or  preclude   competitors  from
developing production  techniques or equipment with features identical,  similar
or superior to the Company's. The Company believes, however, that because of the
rapid  pace of  technological  change in the data  communications  industry  and
particularly  in the  fiber  optic  cable  segment,  legal  protection  for  the
Company's  products is less  significant  to the  Company's  prospects  than the
knowledge,  ability and expertise of its management and technical personnel with
respect to the timely  development  and  production  of new products and product
enhancements.  The Company  considers its proprietary  knowledge with respect to
the  development  and  manufacture of fiber optic cable to be a valuable  asset.
This expertise enables the Company to formulate new cable compositions,  develop
special  coatings  and  coating  methods,  develop and  implement  manufacturing
improvements   and  quality  control   techniques,   and  design  and  construct
manufacturing and quality control equipment. The Company restricts access to its
manufacturing  facility  and  engineering  documentation  to maintain  security.
Employees are required to sign nondisclosure agreements.

     The  Company  believes  that  none of its  products,  trademarks  or  other
proprietary rights infringes upon the proprietary rights of others. There can be
no assurance,  however,  that third parties will not assert  infringement claims
against  the  Company in the future  with  respect to the  Company's  present or
future  products which may require the Company to enter into license  agreements
or result in protracted and costly litigation,  regardless of the merits of such
claims.


COMPETITION

     The market for fiber optic cable, including the moderate distance market in
which the Company's  products are concentrated,  is highly  competitive.  Siecor
Corp. (a joint venture of Siemens AG and Coming) and Lucent Technologies are the
leading  manufacturers of fiber optic cable for both the long distance telephone
market and the moderate distance market.  Although both manufacture  gel-filled,
loose tube  cables,  a  significant  portion of Lucent  Technologies  and Siecor
Corp.'s fiber optic cable sales are tight-buffered fiber optic cable products in
the moderate distance market. Also, Coming and Lucent Technologies are principal
suppliers of optical  fiber  worldwide.  The  Company's  competitors,  including
Siecor  Corp.  and Lucent  Technologies,  are more  established,  having a large
business  base in the long  distance  telephone,  gel-filled,  loose  tube cable
market.  Those  companies can benefit from greater market  recognition  and have
greater financial, research and development,  production and marketing resources
than the Company.

     Additionally,  fiber  optic  cable  competes  with copper wire cable on the
basis  of cost  and  performance  tradeoffs.  The  cost  of the  electro-optical
interfaces  required  for fiber  optic  systems  and  higher  speed  electronics
generally  associated  with high  performance  fiber optic systems can make them
uncompetitive  in  applications  where the  advantages  of optical fiber are not
required.  Fiber optic cable also competes with other  alternative  transmission
media including wireless and satellite communications.

     The Company believes that it competes  successfully against its competitors
on the basis of breadth of product features,  quality,  ability to meet delivery
schedules,  technical support and service,  breadth of distribution channels and
price. Maintaining such competitive advantages will require continued investment
by the  Company in product  development,  sales and  marketing.  There can be no
assurance  that  the  Company  will  have  sufficient  resources  to  make  such
investments or that the Company will be able to make the technological  advances
necessary to maintain its competitive position. An increase in compe-


                                       11
<PAGE>
tition  could have a  material  adverse  effect on the  Company's  business  and
operating  results  because  of  price  reductions  and  loss of  market  share.
Competition  could  increase  if new  companies  enter the market or if existing
competitors expand their product lines.


EMPLOYEES

     As of October  31,  1997,  the  Company  employed  a total of 145  persons,
including  55 in sales,  marketing  and  customer  service,  12 in  engineering,
product development and quality control, 68 in manufacturing,  and 10 in finance
and  administration.  None of the Company's  employees is represented by a labor
union.  The Company has  experienced  no work stoppage and believes its employee
relations are excellent.  The Company has a monthly bonus plan for all employees
along with an end of year profit sharing plan.


ITEM 2. PROPERTIES

     The  Company's  principal  administration,  marketing,  manufacturing,  and
product  development  facilities  are located in a 148,000  square foot building
located  adjacent to the Roanoke,  Virginia  airport and major trucking  company
facilitates.  These  facilities were expanded from 74,000 to 148,000 square feet
through  construction  which was completed in January 1997 on land  purchased by
the Company in 1994 adjacent to the  Company's  existing  facility.  The Company
believes that its production  equipment is presently  operating at approximately
50% of its capacity. 


ITEM 3. LEGAL PROCEEDINGS

     In the opinion of the Company's management,  there are no legal proceedings
pending  to which the  Company is a party or to which any of its  properties  is
subject,  other than  ordinary,  routine  litigation  incidental to the business
which is not  expected  to have a  material  adverse  effect on the  results  of
operations, financial condition or cash flows of the Company.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no issues or matters  submitted  to a vote of  security  holders
during the fourth quarter of the fiscal year ended October 31, 1997.


                                       12
<PAGE>

                                    PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Stock is traded on the Nasdaq  National  Market under
the symbol "OCCF" and began trading on April 2, 1996.  The following  table sets
forth for the  fiscal  periods  indicated  the high and low sales  prices of the
Common Stock,  as reported on the Nasdaq  National  Market,  during the two most
recent fiscal years.






<TABLE>
<CAPTION>
                FISCAL YEAR ENDED OCTOBER 31, 1997                     HIGH      LOW
                ----------------------------------                   -------   ------
<S>                                                                   <C>        <C>
       First Quarter (November 1, 1996 to January 31, 1997)  ......   14 3/4     10 3/8
       Second Quarter (February 1 to April 30, 1997)   ............   17 3/4      9 7/8
       Third Quarter (May 1 to July 31, 1997) .....................   13 1/8      7 1/8
       Fourth Quarter (August 1 to October 31, 1997)   ............   16 1/4      7 7/8
               

              FISCAL YEAR ENDED OCTOBER 31, 1996
              ------------------------------------
       Second Quarter (April 2 to April 30, 1996)(1)   ............    4 5/8      2 3/8
       Third Quarter (May 1 to July 31, 1996)(1) ..................   34          4 1/4
       Fourth Quarter (August 1 to October 31, 1996)   ............   20          8 1/4
</TABLE>

----------
(1) The  Company's  stock  split 2 for 1 on May 31, 1996 and 2 for 1 on June 21,
    1996. All per share amounts  reported have need adjusted to give retroactive
    effect to these stock splits.


     As of January 15, 1998,  there were an estimated 5,500 holders of record of
the Common Stock.


     The Company has not paid or declared any cash dividends on its common stock
since the completion of the initial public  offering in April 1996.  While there
are no restrictions on the payment of dividends, the Company does not anticipate
the  payment  of any cash  dividends  on its  common  stock for the  foreseeable
future. 


                                       13
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA


                           OPTICAL CABLE CORPORATION
                            SELECTED FINANCIAL DATA





<TABLE>
<CAPTION>
                                                                            YEARS ENDED OCTOBER 31,
                                                     ---------------------------------------------------------------------
                                                       1997          1996         1995           1994           1993
                                                     -----------   ----------   ------------   ------------   ------------
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>           <C>          <C>            <C>            <C>
STATEMENT OF INCOME DATA:
Net sales  .......................................    $52,189       $ 45,152     $ 36,360       $ 26,217       $ 24,980
Cost of goods sold  ..............................     30,613         24,907       20,121         14,138         13,036
                                                      -------       --------     --------       --------       --------
   Gross profit  .................................     21,576         20,245       16,239         12,079         11,944
Total operating expenses  ........................      9,572          8,416        7,660          7,967          7,724
                                                      -------       --------     --------       --------       --------
   Income from operations ........................     12,004         11,829        8,579          4,112          4,220
Other income (expense), net  .....................        (47)           198         (379)          (614)          (870)
                                                      -------       --------     --------       --------       --------
   Income before income tax expense and extraordi-
    nary item ....................................     11,957         12,027        8,200          3,498          3,350
Income tax expense (1) ...........................      4,150          2,806           --             --             --
                                                      -------       --------     --------       --------       --------
   Income before extraordinary item   ............      7,807          9,221        8,200          3,498          3,350
Extraordinary item  ..............................         --             --           --           (149)            --
                                                      -------       --------     --------       --------       --------
   Net income ....................................    $ 7,807       $  9,221     $  8,200       $  3,349       $  3,350
                                                      =======       ========     ========       ========       ========
Pro forma Income Data (1):
   Net income before pro forma income tax provi-
    sion, as reported.............................                  $  9,221
   Pro forma income tax provision  ...............                     1,747
                                                                    --------
   Pro forma net income   ........................                  $  7,474
                                                                    ========
Net income per share (pro forma for 1996)   ......    $ 0.202       $  0.190
                                                      =======       ========
Weighted average shares outstanding (pro forma for
 1996)  ..........................................     38,675         39,361
                                                      =======       ========
BALANCE SHEET DATA:
Working capital  .................................    $19,912       $ 14,377     $  9,076       $ 10,140       $  6,322
Total assets  ....................................     35,214         31,127       18,819         19,056         16,465
Long-term debt, less current maturities  .........         --             --           --          8,000          2,000
Total stockholders' equity   .....................     31,379         23,572       14,952          7,832          7,161
</TABLE>

----------
(1) Through  March 31,  1996,  the  Company was not subject to federal and state
    income taxes since it had elected,  under provisions of the Internal Revenue
    Code, to be taxed as an S Corporation. In connection with the closing of the
    Company's initial public offering (see note 11 to financial statements), the
    Company  terminated its status as an S Corporation  effective March 31, 1996
    and became  subject to federal  and state  income  taxes.  Accordingly,  the
    statement of income data for the year ended October 31, 1996 includes income
    taxes from April 1, 1996, and for informational  purposes,  the statement of
    income  data for the year  ended  October  31,  1996  includes  a pro  forma
    adjustment  for income  taxes which would have been  recorded if the Company
    had been subject to income taxes for the entire fiscal year presented.


                                       14
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION


GENERAL

     Except for the historical data set forth herein,  the following  discussion
contains certain forward-looking  information.  The Company's actual results may
differ  materially  from these  projected  results.  Factors that could cause or
contribute to such differences  include,  but are not limited to, level of sales
to key  customers,  actions  by  competitors,  fluctuations  in the price of raw
materials, the Company's dependence on a single manufacturing facility,  ability
to protect its  proprietary  manufacturing  technology,  dependence on a limited
number of suppliers and technological changes and introductions of new competing
products.


RESULTS OF OPERATIONS

   Net Sales

     Net sales consists of gross sales of products, less discounts,  refunds and
returns.  Net sales  increased 15.6 percent to $52.2 million in fiscal 1997 from
$45.2 million for fiscal 1996.  This increase was  attributable to the Company's
continued  effort to reach a broader  customer base throughout the United States
and  internationally  with increased  advertising,  trade show  attendance,  and
direct sales presence in more states.  This effort  resulted in greater sales in
all market segments and product types. 

     Net sales increased 24.2 percent to $45.2 million in fiscal 1996 from $36.4
million  for fiscal  1995.  This  increase  was  attributable  to the  Company's
continued  effort to reach a broader  customer base throughout the United States
and internationally with increased advertising, trade show attendance and direct
sales  presence in more  states.  This effort  resulted in greater  sales in all
market segments and product types.

     The Company's  base  business is projected to grow rapidly with  increasing
market share  potential.  Many new markets are expected to emerge as fiber optic
sensors are  developed  for  production  plant  automation,  smart  highways and
security  applications,  along  with a host of  other  specialty  markets.  Most
electronic communication devices produced by the vast number of global suppliers
are expected to rely more heavily on fiber optic communications to achieve their
performance  goals.  Management  believes  the  Company's  unique  technological
background and specialty  market expertise should lend itself well to capture an
increasing  share of this global  market along with  expected  earnings  growth.
Optical  Cable  Corporation  also intends to make  inroads  into  various  other
markets such as single-mode telecommunications and cable television. 


    Gross Profit Margin

     Cost of goods sold  consists of the cost of materials,  compensation  costs
and overhead related to the Company's  manufacturing  operations.  The Company's
gross profit margin  (gross  profit as a percentage  of net sales)  decreased to
41.3 percent in fiscal 1997 from 44.8 percent in fiscal 1996.  This decrease was
due to increased  fiber  prices,  the Company's  product mix sold,  the ratio of
large  orders  and  the  ratio  of  net  sales  attributable  to  the  Company's
distributors  during the year.  During fiscal 1997, sales from orders $50,000 or
more  approximated  20 percent of net sales  compared  to 19 percent  for fiscal
1996. Discounts on large orders are generally greater than for sales from orders
less than  $50,000.  In  addition,  for fiscal 1997,  net sales to  distributors
approximated  51  percent  of net  sales  versus 49  percent  for  fiscal  1996.
Discounts on sales to distributors  are generally  greater than for sales to the
Company's other customer base. 

     The  Company's  gross profit margin  increased  slightly to 44.8 percent in
fiscal 1996 from 44.7 percent in fiscal 1995.


                                       15
<PAGE>
   Selling, General and Administrative Expenses

     Selling,  general and  administrative  expenses consist of the compensation
costs (including sales  commissions) for sales and marketing  personnel,  travel
expenses,  customer  support  expenses,  trade show expenses,  advertising,  the
compensation cost for administration,  finance and general management personnel,
as well as legal  and  accounting  fees.  Selling,  general  and  administrative
expenses as a percentage  of net sales were 18.3 percent in fiscal 1997 compared
to 18.6 percent in fiscal 1996.  This lower  percentage was primarily the result
of the fact that net sales  for  fiscal  1997  increased  at a faster  rate than
selling,  general and administrative expenses compared to fiscal 1996. The ratio
of selling, general and administrative expenses as a percentage of net sales was
also impacted due to incurring  approximately  $350,000 of  shareholder  related
expenses  during fiscal 1997,  such as printing and  distribution  costs for the
annual  report  and the proxy  statement,  and costs for the  annual  meeting of
shareholders,  compared to approximately  $141,000 of similar expenses in fiscal
1996. 

     Selling,  general and administrative  expenses as a percentage of net sales
were 18.6 percent in fiscal 1996  compared to 21.1 percent in fiscal 1995.  This
lower  percentage was primarily the result of the fact that net sales for fiscal
1996  increased  at a faster  rate  than  selling,  general  and  administrative
expenses compared to fiscal 1995.

   Interest Expense

     The  $369,000  reduction  in interest  expense in fiscal  1996  compared to
fiscal  1995 is due to the  Company  generating  adequate  amounts  of cash from
operations to meet its cash needs thereby requiring limited use of its revolving
line of credit during fiscal 1997 and 1996.

   Income Before Income Tax Expense

     Income  before  income tax expense of $12 million in fiscal 1997  decreased
$70,000  compared to fiscal  1996.  This slight  decrease was  primarily  due to
increased sales volume offset by the decrease in gross profit margin.

     Income before income tax expense  increased 46.7 percent to $12 million for
fiscal 1996 from $8.2 million for fiscal 1995.  This  increase was primarily due
to increased sales volume and a reduction in interest expense.

   Income Taxes

     Through  March 31,  1996,  the Company was not subject to federal and state
income taxes since it had elected to be taxed as an S Corporation. In connection
with  the  Company's   initial  public   offering  (see  note  11  to  financial
statements),  the Company  terminated  its status as an S Corporation  effective
March 31,  1996 and became  subject  to  federal  and state  income  taxes.  The
statement of income for the year ended October 31, 1997  includes  income taxes,
at an effective  tax rate of 34.7  percent,  and the statement of income for the
year ended October 31, 1996 includes  income taxes from April 1, 1996,  and, for
informational purposes, a pro forma adjustment for income taxes, at an effective
tax rate of 37.9 percent, which would have been recorded if the Company had been
subject to income taxes for the entire period presented. The lower effective tax
rate for fiscal 1997 is due  primarily to the benefit of the  Company's  foreign
sales corporation.

     The Company  recorded a $114,000 net benefit for deferred income taxes upon
termination of the Company's S Corporation  status. The adjustment  reflects the
net deferred  income tax asset balance at March 31, 1996 in accordance  with the
provisions of Statement of Financial  Accounting  Standards No. 109,  Accounting
for  Income  Taxes,  which  requires  an asset and  liability  approach  for the
accounting  and financial  reporting of income  taxes.  See note 10 to financial
statements for further details regarding income taxes.

   Net Income

     Net income for fiscal 1997 was $7.8  million  compared to $9.2  million for
fiscal  1996.  Net income  decreased  $1.4  million due  primarily to income tax
expense of $4.1 million for fiscal 1997 compared to $2.8 million for fiscal 1996
as a result of the Company's termination of its S Corporation status effective


                                       16
<PAGE>
March 31, 1996.  Net income for fiscal 1997 increased  $333,000,  or 4.5 percent
over pro forma net income for fiscal 1996. This increase resulted primarily from
the decrease in income before income tax expense of $70,000, and by the $404,000
decrease  in income  tax  expense in fiscal  1997 from the pro forma  income tax
provision in fiscal 1996.

     Net income increased 12.4 percent to $9.2 million for fiscal 1996 from $8.2
million for fiscal 1995.  This increase was a result of a $3.8 million  increase
in income  before income tax expense which was offset by the recording of income
tax  expense  of $2.8  million  for  fiscal  1996 as a result  of the  Company's
termination of its S Corporation status effective March 31, 1996.


FINANCIAL CONDITION

     Total  assets at October 31, 1997 were $35.2  million,  an increase of $4.1
million,  or 13.1 percent over October 31, 1996. This increase was primarily due
to an increase of $563,000 in trade accounts receivable, net, resulting from the
increased  sales volume during fourth quarter 1997 as compared to fourth quarter
1996, an increase of $1.8 million in inventories, and a $2.3 million increase in
property and equipment,  net, due to the Company's expansion of its headquarters
facilities.  The expansion  was funded in part through the $692,000  decrease in
cash and cash equivalents.

     Total  stockholders'  equity at October 31, 1997 increased $7.8 million, or
33.1 percent from October 31, 1996 with net income  retained  accounting for the
increase.


LIQUIDITY AND CAPITAL RESOURCES

     The Company's  primary  capital needs have been to (i) fund working capital
requirements, (ii) repay indebtedness, (iii) purchase property and equipment for
expansion  and  (iv)  fund  distributions  to its  previously  sole  stockholder
primarily  to  satisfy  his tax  liabilities  resulting  from  the  Company's  S
Corporation  status,  which was terminated March 31, 1996. The Company's primary
sources  of  financing  have been  cash from  operations,  bank  borrowings  and
proceeds from the initial  public  offering of the Company's  common stock.  The
Company  believes  that its cash flow from  operations  and  available  lines of
credit  will be  adequate  to fund its  operations  for at least the next twelve
months. 

     On February 28, 1997,  the Company and its bank executed a loan  commitment
letter,  which renewed its $5 million secured revolving line of credit available
for general  corporate  purposes and  established a $10 million  secured line of
credit to fund potential  acquisitions,  mergers or joint ventures. The lines of
credit are equally and ratably  secured by the  Company's  accounts  receivable,
contract rights, inventory,  furniture and fixtures, machinery and equipment and
general  intangibles.  The lines of credit  will expire on  February  28,  1998,
unless renewed or extended. As of the date hereof, the Company has no additional
material sources of financing.

     On October 29,  1997,  the  Company's  Board of  Directors  authorized  the
repurchase of up to $5 million of the Company's  common stock in the open market
or in  privately  negotiated  transactions.  The  Company  intends to use excess
working capital and other sources as appropriate to finance the share repurchase
program. 

     Cash flows from operations were  approximately  $4.0 million,  $4.1 million
and $11.3 million in fiscal 1997, 1996 and 1995, respectively.  For fiscal 1997,
cash flows from operations were primarily  provided by operating income,  offset
by an  increase  in trade  accounts  receivable  of  $552,000,  an  increase  in
inventory  of $1.8  million  and a decrease  in  accounts  payable  and  accrued
expenses of $2.3  million.  For fiscal  1996,  cash flows from  operations  were
primarily provided by operating income,  offset by an increase in trade accounts
receivable  of $3.4 million and an increase in inventory of $4.2  million.  Cash
flows from operations in fiscal 1995 were primarily provided by operating income
and a decrease in inventory of $2.8 million.  In 1995,  the Company  reduced its
inventory of optical fiber because it had additional access to ready supplies.

     Net cash used in  investing  activities  was for  expenditures  related  to
facilities  and  equipment  and was $3.6  million,  $3.1 million and $387,000 in
fiscal  1997,  1996 and  1995,  respectively.  The  Company's  expansion  of its
headquarters  facilities  was  completed in fiscal  1997,  and as of October 31,
1997, there were no material commitments for additional capital expenditures.


                                       17
<PAGE>

     Net cash provided by (used in)  financing  activities  was $(1.1)  million,
$193,000 and $(10.5)  million in fiscal 1997, 1996 and 1995,  respectively.  The
net cash used in financing  activities in fiscal 1997  consisted of repayment of
debt outstanding under the Company's lines of credit of $1.1 million compared to
an  increase  of $794,000 in fiscal  1996.  The net cash  provided by  financing
activities in fiscal 1996 also included net proceeds from the issuance of common
stock of $5.6  million,  offset by $6.2  million  in cash  distributions  to the
Company's  previously  sole  stockholder  for  payment of his income  taxes with
respect to the taxable  income of the Company  prior to the  termination  of the
Company's S  Corporation  status.  The net cash used in financing  activities in
fiscal 1995 consisted of a decrease in debt outstanding under the line of credit
of  $5.9  million,   payments  on  long-term  debt  of  $3.5  million  and  cash
distributions to the Company's previously sole stockholder of $1.1 million.

     Given the  Company's  software and hardware and the nature of its industry,
management  does not consider the cost of addressing the Year 2000 issue to be a
material event or uncertainty  that would cause reported  financial  information
not to be indicative of future operating results or financial condition.


NEW ACCOUNTING STANDARDS

   SFAS No. 128

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards  No. 128,  Earnings per Share.  SFAS No. 128
establishes  standards for computing and presenting earnings per share (EPS) and
applies to entities with  publicly held common stock or potential  common stock.
SFAS  No.  128  simplifies  the  standards  for  computing  earnings  per  share
previously  found in APB  Opinion  No. 15,  Earnings  per Share,  and makes them
comparable to  international  EPS  standards.  It replaces the  presentation  of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income  statement  for all  entities
with complex capital  structures and requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.

     Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average  number of common shares outstanding
for the period.  Diluted EPS reflects the potential dilution that could occur if
securities or other  contracts to issue common stock were exercised or converted
into common  stock or resulted in the  issuance of common stock that then shared
in the earnings of the entity.

     SFAS No. 128 is  effective  for  financial  statements  issued for  periods
ending after December 15, 1997,  including interim periods;  earlier application
is not permitted. SFAS No. 128 requires restatement of all prior-period EPS data
presented. It is not anticipated that SFAS No. 128 will have any material effect
on current or prior period EPS data presented by the Company.


   SFAS No. 130

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements. SFAS
No. 130 was issued to address concerns over the practice of reporting elements
of comprehensive income directly in equity.

     This Statement  requires all items that are required to be recognized under
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  in equal  prominence  with  the  other
financial  statements.  It does not require a specific format for that financial
statement but requires that an enterprise  display an amount  representing total
comprehensive income for the period in that financial statement.

     SFAS No.  130 is  applicable  to all  entities  that  provide a full set of
financial  statements.  Enterprises  that  have no items of other  comprehensive
income in any period presented are excluded from the scope of this Statement.


                                       18
<PAGE>

     SFAS No. 130 is  effective  for both interim and annual  periods  beginning
after December 15, 1997.  Comparative  financial statements provided for earlier
periods  are  required to be  reclassified  to reflect  the  provisions  of this
Statement. It is not anticipated that SFAS No. 130 will have any material effect
on  current  or prior  period  financial  statement  displays  presented  by the
Company.


   SFAS No. 131

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  Disclosures  about  Segments  of an
Enterprise and Related Information.  SFAS No. 131 establishes  standards for the
way  public  business  enterprises  are to report  information  about  operating
segments in annual financial statements and requires those enterprises to report
selected  information  about  operating  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services, geographic areas and major customers.

     SFAS No. 131 is effective for financial  statements  for periods  beginning
after  December  15,  1997.  In the  initial  year of  application,  comparative
information for earlier years is to be restated,  unless it is  impracticable to
do so. SFAS No. 131 need not be applied to interim  financial  statements in the
initial year of its application, but comparative information for interim periods
in the initial year of application shall be reported in financial statements for
interim  periods in the second year of application.  It is not anticipated  that
SFAS No. 131 will have any material  effect on current or prior  period  segment
disclosures presented by the Company. 


                                       19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                    INDEX TO
                             FINANCIAL STATEMENTS
                       AND FINANCIAL STATEMENT SCHEDULES



<TABLE>
<CAPTION>
                                                                                   PAGE
                                                                                   -----
<S>                                                                                <C>
FINANCIAL STATEMENTS:

 Independent Auditors' Report  ...................................................  21

 Balance Sheets as of October 31, 1997 and 1996  .................................  22

 Statements of Income for the Years ended October 31, 1997, 1996 and 1995   ......  23

 Statements of Stockholders' Equity for the Years ended October 31, 1997, 1996 and
   1995   ........................................................................  24

 Statements of Cash Flows for the Years ended October 31, 1997, 1996 and 1995  ...  25

 Notes to Financial Statements ...................................................  26


FINANCIAL STATEMENT SCHEDULES:
 Financial statement schedules have been omitted since they are not required, not
 applicable, or the information is otherwise included in the financial statements
 of the Company.
</TABLE>



                                       20
<PAGE>

                         INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders
Optical Cable Corporation:


     We  have  audited  the   accompanying   balance  sheets  of  Optical  Cable
Corporation  as of October 31,  1997 and 1996,  and the  related  statements  of
income,  stockholders'  equity,  and cash  flows  for  each of the  years in the
three-year  period ended October 31, 1997.  These  financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the financial position of Optical Cable Corporation as
of October 31, 1997 and 1996,  and the  results of its  operations  and its cash
flows for each of the years in the three-year  period ended October 31, 1997, in
conformity with generally accepted accounting principles.


                                        KPMG Peat Marwick LLP


Roanoke, Virginia
December 12, 1997

                                       21
<PAGE>

                           OPTICAL CABLE CORPORATION
                                BALANCE SHEETS
                           OCTOBER 31, 1997 AND 1996






<TABLE>
<CAPTION>
                                                                             OCTOBER 31,
                                                                     ----------------------------
                                                                        1997            1996
                                                                     -------------   ------------
<S>                                                                  <C>             <C>
                                        ASSETS
Current assets:
 Cash and cash equivalents .......................................    $   985,807     $ 1,677,739
 Trade accounts receivable, net of allowance for doubtful accounts
   of $307,400 in 1997 and $300,000 in 1996  .....................      9,931,276       9,368,476
 Other receivables   .............................................        540,102         354,041
 Due from employees  .............................................          3,534           1,475
 Inventories   ...................................................     12,019,443      10,261,437
 Prepaid expenses ................................................        121,046          64,863
 Deferred income taxes  ..........................................         81,484         155,304
                                                                      -----------     -----------
   Total current assets ..........................................     23,682,692      21,883,335

Other assets, net ................................................         50,953          67,996
Property and equipment, net   ....................................     11,480,433       9,175,871
                                                                      -----------     -----------
   Total assets   ................................................    $35,214,078     $31,127,202
                                                                      ===========     ===========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Notes payable ...................................................    $        --     $ 1,103,000
 Accounts payable and accrued expenses ...........................      2,593,256       5,488,765
 Accrued compensation and payroll taxes   ........................        612,736         676,725
 Income taxes payable   ..........................................        564,999         237,926
                                                                      -----------     -----------
   Total current liabilities  ....................................      3,770,991       7,506,416

Deferred income taxes   ..........................................         64,382          49,227
                                                                      -----------     -----------
   Total liabilities .............................................      3,835,373       7,555,643
                                                                      -----------     -----------
Stockholders' equity:
 Preferred stock, no par value, authorized 1,000,000 shares; none
   issued and outstanding  .......................................             --              --
 Common stock, voting; no par value, authorized 50,000,000 shares;
   issued and outstanding 38,675,416 shares  .....................     18,594,116      18,594,116
 Retained earnings   .............................................     12,784,589       4,977,443
                                                                      -----------     -----------
   Total stockholders' equity ....................................     31,378,705      23,571,559

Commitments and contingencies                                         -----------     -----------
   Total liabilities and stockholders' equity   ..................    $35,214,078     $31,127,202
                                                                      ===========     ===========
</TABLE>



                See accompanying notes to financial statements.

                                       22
<PAGE>

                           OPTICAL CABLE CORPORATION
                             STATEMENTS OF INCOME
                  YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995



<TABLE>
<CAPTION>
                                                                     YEARS ENDED OCTOBER 31,
                                                       ---------------------------------------------------
                                                           1997              1996             1995
                                                       ---------------   ---------------   ---------------
<S>                                                    <C>               <C>               <C>
Net sales ..........................................    $52,188,850       $45,152,299       $36,359,953
Cost of goods sold .................................     30,612,690        24,907,373        20,121,355
                                                        -----------       -----------       -----------
   Gross profit ....................................     21,576,160        20,244,926        16,238,598
Selling, general and administrative expenses  ......      9,572,061         8,415,798         7,660,100
                                                        -----------       -----------       -----------
   Income from operations   ........................     12,004,099        11,829,128         8,578,498
Other income (expense):
 Interest income   .................................         15,351            94,888               175
 Interest expense  .................................        (17,930)           (9,595)         (378,205)
 Other, net  .......................................        (44,580)          112,988              (377)
                                                        -----------       -----------       -----------
   Other income (expense), net .....................        (47,159)          198,281          (378,407)
                                                        -----------       -----------       -----------
   Income before income tax expense  ...............     11,956,940        12,027,409         8,200,091
Income tax expense .................................      4,149,794         2,806,849                --
                                                        -----------       -----------       -----------
   Net income   ....................................    $ 7,807,146       $ 9,220,560       $ 8,200,091
                                                        ===========       ===========       ===========
Pro forma income data (unaudited):
 Net income before pro forma income tax pro-
   vision, as reported .............................                      $ 9,220,560
 Pro forma income tax provision   ..................                        1,746,513
                                                                          -----------
 Pro forma net income ..............................                      $ 7,474,047
                                                                          ===========
Net income per share (pro forma for 1996)  .........    $     0.202       $     0.190
                                                        ===========       ===========
Weighted average shares outstanding (pro forma
 for 1996)   .......................................     38,675,416        39,360,659
                                                        ===========       ===========
</TABLE>

                See accompanying notes to financial statements.

                                       23
<PAGE>


                           OPTICAL CABLE CORPORATION
                      STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                                  COMMON STOCK           ADDITIONAL                            TOTAL
                                          ----------------------------    PAID-IN          RETAINED        STOCKHOLDERS'
                                             SHARES         AMOUNT        CAPITAL          EARNINGS           EQUITY
                                          ------------   -------------   -------------   ---------------   --------------
<S>                                       <C>            <C>             <C>             <C>               <C>
Balances at October 31, 1994  .........    36,000,000     $       596     $  767,849     $ 7,063,249        $  7,831,694
Cash distributions to previously sole
 stockholder   ........................            --              --             --      (1,080,000)         (1,080,000)
Net income  ...........................            --              --             --       8,200,091           8,200,091
                                           ----------     -----------     ----------     -----------        ------------
Balances at October 31, 1995  .........    36,000,000             596        767,849      14,183,340          14,951,785
Net income -- five months ended
 March 31, 1996   .....................            --              --             --       4,243,117           4,243,117
Issuance of common stock for cash
 ($2.50 per share, less issuance
 costs of $1,139,326)..................     2,675,416       5,549,214             --              --           5,549,214
Cash distributions to previously sole
 stockholder   ........................            --              --             --      (6,150,000)         (6,150,000)
Recapitalization  .....................            --      13,044,306       (767,849)    (12,276,457)                 --
Net income -- seven months ended
 October 31, 1996 .....................            --              --             --       4,977,443           4,977,443
                                           ----------     -----------     ----------     -----------        ------------
Balances at October 31, 1996  .........    38,675,416      18,594,116             --       4,977,443          23,571,559
Net income  ...........................            --              --             --       7,807,146           7,807,146
                                           ----------     -----------     ----------     -----------        ------------
Balances at October 31, 1997  .........    38,675,416     $18,594,116     $       --     $12,784,589        $ 31,378,705
                                           ==========     ===========     ==========     ===========        ============
</TABLE>


                See accompanying notes to financial statements.

                                       24
<PAGE>

                           OPTICAL CABLE CORPORATION
                           STATEMENTS OF CASH FLOWS
                  YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                            YEARS ENDED OCTOBER 31,
                                                               -------------------------------------------------
                                                                  1997             1996              1995
                                                               --------------   --------------   ---------------
<S>                                                            <C>              <C>              <C>
Cash flows from operating activities:
 Net income ................................................   $7,807,146       $9,220,560       $ 8,200,091
 Adjustments to reconcile net income to net cash pro-
   vided by operating activities:
    Depreciation and amortization   ........................      706,076          533,445           404,469
    Bad debt expense (recovery)  ...........................      (10,778)         266,366            87,652
    Deferred income taxes  .................................       88,975         (106,077)               --
    Loss on sale of property and equipment   ...............           --               --               381
    (Increase) decrease in:
      Trade accounts receivable  ...........................     (552,022)      (3,447,954)       (1,921,238)
      Other receivables ....................................     (186,061)        (255,744)          (45,514)
      Due from employees   .................................       (2,059)           1,750            (2,800)
      Inventories ..........................................   (1,758,006)      (4,228,395)        2,813,002
      Prepaid expenses  ....................................      (56,183)          21,690           (80,721)
      Other assets   .......................................           39          116,237          (201,237)
    Increase (decrease) in:
      Accounts payable and accrued expenses  ...............   (2,260,416)       1,881,379         1,594,951
      Accrued compensation and payroll taxes ...............      (63,989)        (154,472)          450,928
      Income taxes payable .................................      327,073          237,926                --
                                                               ----------       ----------       -----------
       Net cash provided by operating activities   .........    4,039,795        4,086,711        11,299,964
                                                               ----------       ----------       -----------
Cash flows from investing activities:
 Purchase of property and equipment ........................   (3,628,727)      (3,137,421)         (387,231)
 Proceeds from sale of property and equipment   ............           --               --                20
                                                               ----------       ----------       -----------
       Net cash used in investing activities ...............   (3,628,727)      (3,137,421)         (387,211)
                                                               ----------       ----------       -----------
Cash flows from financing activities:
 Net borrowings (payments) on notes payable  ...............   (1,103,000)         794,000        (5,903,238)
 Payments on long-term debt   ..............................           --               --        (3,500,000)
 Proceeds from issuance of common stock, net of issu-
   ance costs ..............................................           --        5,549,214                --
 Cash distributions to previously sole stockholder .........           --       (6,150,000)       (1,080,000)
                                                               ----------       ----------       -----------
       Net cash provided by (used in) financing ac-
         tivities..........................................    (1,103,000)         193,214       (10,483,238)
                                                               ----------       ----------       -----------
Net increase (decrease) in cash and cash equivalents  ......     (691,932)       1,142,504           429,515
Cash and cash equivalents at beginning of year  ............    1,677,739          535,235           105,720
                                                               ----------       ----------       -----------
Cash and cash equivalents at end of year  ..................   $  985,807       $1,677,739       $   535,235
                                                               ==========       ==========       ===========
Supplemental Disclosure of Cash Flow Information:
 Cash payments for interest   ..............................   $   17,930       $    9,595       $   386,663
                                                               ==========       ==========       ===========
 Income taxes paid   .......................................   $3,733,746       $2,675,000       $        --
                                                               ==========       ==========       ===========
 Noncash investing activities - capital expenditures
   accrued in accounts payable   ...........................   $  245,566       $  880,659       $        --
                                                               ==========       ==========       ===========
</TABLE>


                See accompanying notes to financial statements.

                                       25
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                  YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995


(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   (a) Description of Business

     Optical Cable  Corporation  (the Company)  manufactures and markets a broad
range of fiber optic cables for "high bandwidth" transmission of data, video and
audio  communications over moderate distances.  The Company's fiber optic cables
are sold nationwide and in over 68 foreign countries (also see note 9).


   (b) Cash Equivalents

     Cash  equivalents  of $763,000 and $1,397,510 at October 31, 1997 and 1996,
respectively, consist of overnight repurchase agreements at October 31, 1997 and
money market mutual funds at October 31, 1996. For purposes of the statements of
cash flows,  the Company  considers  all highly  liquid  debt  instruments  with
original maturities of three months or less to be cash equivalents.


   (c) Inventories

     Inventories  of raw  materials  and  production  supplies are stated at the
lower  of  cost  (specific  identification  for  optical  fibers  and  first-in,
first-out  for  other  raw  materials  and   production   supplies)  or  market.
Inventories  of work in process and finished  goods are stated at average  cost,
which includes raw materials, direct labor and manufacturing overhead.


   (d) Property and Equipment

     Property and equipment are stated at cost.  Depreciation  and  amortization
are provided for using both straight-line and declining balance methods over the
estimated  useful lives of the assets.  Estimated  useful lives are  thirty-nine
years for buildings and  improvements  and five to seven years for machinery and
equipment and furniture and fixtures.


   (e) Revenue Recognition

     Revenue is  recognized  at the time of product  shipment or delivery to the
customer, based on shipping terms.


   (f) Income Taxes

     Through  March 31,  1996,  the Company was not subject to federal and state
income  taxes since it had elected,  under  provisions  of the Internal  Revenue
Code, to be taxed as an S Corporation.  In lieu of corporation income taxes, the
stockholders of an S Corporation are taxed on their  proportionate  share of the
Company's taxable income.

     In connection  with the closing of the Company's  initial  public  offering
(see note 11), the Company  terminated its status as an S Corporation  effective
March  31,  1996  and  became   subject  to  federal  and  state  income  taxes.
Accordingly,  the  statement  of income  for the year  ended  October  31,  1996
includes income taxes from April 1, 1996, and for  informational  purposes,  the
statement  of income for the year ended  October 31,  1996  includes a pro forma
adjustment  for income  taxes which would have been  recorded if the Company had
been subject to income taxes for the entire fiscal year presented.

     Effective  March 31, 1996,  income taxes are  accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases and operating loss and tax credit  carryforwards.  Deferred
tax assets and liabilities are


                                       26
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.


   (g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

     The Company  adopted the  provisions  of SFAS No. 121,  Accounting  for the
Impairment of Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of, on
November 1, 1996.  This Statement  requires that  long-lived  assets and certain
identifiable  intangibles be reviewed for impairment  whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison of the carrying  amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceed the fair value of the assets.  Assets to be disposed
of are reported at the lower of the carrying  amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the Company's
financial position, results of operations, or liquidity.


   (h) Stock Option Plan

     Prior to November 1, 1996, the Company  accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees,  and related  interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying  stock  exceeded the exercise  price.  On
November 1, 1996, the Company  adopted SFAS No. 123,  Accounting for Stock-Based
Compensation,  which  permits  entities to recognize as expense over the vesting
period  the  fair  value  of all  stock-based  awards  on  the  date  of  grant.
Alternatively,  SFAS No.  123 also  allows  entities  to  continue  to apply the
provisions  of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based  method defined in SFAS No. 123 had been
applied.  The Company has  elected to  continue to apply the  provisions  of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.


   (i) Pro Forma Net Income Per Share

     Pro forma net  income  per share was  computed  by  dividing  pro forma net
income by the pro forma  weighted  average  number of common shares  outstanding
during the period (as  adjusted for the  recapitalization)  and by deeming to be
outstanding  the number of shares  (1,800,000)  the Company would have needed to
issue at the initial public offering price per share ($2.50) to pay a $1 million
cash distribution to the previously sole stockholder in December 1995 and a $3.5
million cash distribution to the previously sole stockholder out of the proceeds
of the initial public offering.


   (j) Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amounts of assets and liabilities and the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from these estimates.


                                       27
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

(2) ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

     A summary of changes in the allowance for doubtful accounts  receivable for
the years ended October 31, 1997, 1996 and 1995 follows:


<TABLE>
<CAPTION>
                                                      YEARS ENDED OCTOBER 31,
                                           ---------------------------------------------
                                             1997            1996            1995
                                           -------------   -------------   -------------
<S>                                        <C>             <C>             <C>
   Balance at beginning of year   ......    $ 300,000       $  200,000      $  250,000
   Bad debt expense (recovery) .........      (10,778)         266,366          87,652
   Losses charged to allowance .........      (26,592)        (176,512)       (170,070)
   Recoveries added to allowance  ......       44,770           10,146          32,418
                                            ---------       ----------      ----------
   Balance at end of year   ............    $ 307,400       $  300,000      $  200,000
                                            =========       ==========      ==========
</TABLE>


(3) INVENTORIES

     Inventories at October 31, 1997 and 1996 consist of the following:


                                         OCTOBER 31,
                                 ----------------------------
                                    1997            1996
                                 -------------   ------------
   Finished goods ............    $ 4,854,697     $ 2,465,659
   Work in process   .........      1,976,970       3,104,339
   Raw materials  ............      5,125,044       4,645,843
   Production supplies  ......         62,732          45,596
                                  -----------     -----------
                                  $12,019,443     $10,261,437
                                  ===========     ===========


(4) PROPERTY AND EQUIPMENT

     Property  and  equipment  at  October  31,  1997 and 1996  consists  of the
following:


<TABLE>
<CAPTION>
                                                                       OCTOBER 31,
                                                            ---------------------------------
                                                               1997              1996
                                                            ---------------   ---------------
<S>                                                         <C>               <C>
   Land  ................................................    $  2,745,327      $  2,745,327
   Building and improvements  ...........................       7,058,660         3,401,997
   Machinery and equipment ..............................       4,578,631         3,982,889
   Furniture and fixtures  ..............................         732,963           428,742
   Construction in progress   ...........................          33,619         1,596,611
                                                             ------------      ------------
     Total property and equipment, at cost   ............      15,149,200        12,155,566
   Less accumulated amortization and depreciation  ......      (3,668,767)       (2,979,695)
                                                             ------------      ------------
     Property and equipment, net ........................    $ 11,480,433      $  9,175,871
                                                             ============      ============
</TABLE>


                                       28
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

(5) NOTES PAYABLE

     On February 28, 1997,  the Company and its bank executed a loan  commitment
letter,  which renewed its $5 million secured revolving line of credit available
for general  corporate  purposes and  established a $10 million  secured line of
credit to fund potential  acquisitions,  mergers or joint ventures. The lines of
credit bear  interest at 1.50 percent above the monthly LIBOR rate (5.80 percent
as of October 31,  1997) and are equally  and ratably  secured by the  Company's
accounts  receivable,   contract  rights,  inventory,  furniture  and  fixtures,
machinery and equipment and general intangibles. The lines of credit will expire
on February 28, 1998,  unless renewed or extended.  While the lines of credit do
not  require a  compensating  balance  that  legally  restricts  the use of cash
amounts,  at  the  bank's  request,  the  Company  has  agreed  to  maintain  an
unrestricted target cash balance of $125,000.


(6) LEASES

     In August 1994, the Company  entered into a four-year  operating  lease for
computerized  mailing and  shipping  equipment  with an  unrelated  party.  Rent
expense  under this lease  amounted to $25,030  for the years ended  October 31,
1997, 1996 and 1995. Future minimum rental payments required under the lease are
$23,680 payable in fiscal year 1998.


(7) RELATED PARTY AGREEMENTS

     Effective  November 1, 1994, the Company entered into two separate one-year
employment  agreements with its previously sole stockholder.  Total compensation
under the  agreements  consisted  of salary  payments  equal to 6 percent of the
previous fiscal year's net sales.  Effective  February 1, 1995, these agreements
were  replaced  by an  employment  agreement  that  reduces  the salary  payment
percentage from 6 percent to 1 percent and provides for sales  commissions equal
to 1 percent of the positive  difference  between the current  fiscal year's net
sales and the prior fiscal year's net sales. Compensation under these agreements
amounted to $521,889,  $451,523  and  $672,371  for the years ended  October 31,
1997, 1996 and 1995, respectively.

     Effective  November 2, 1994, the Company entered into a services  agreement
to pay sales  commissions  of 4 percent of net foreign sales to OCC-VI,  Inc., a
foreign  sales  corporation.  All of the  outstanding  shares of common stock of
OCC-VI,   Inc.  are  beneficially   owned  by  the  Company's   previously  sole
stockholder.  For  the  year  ended  October  31,  1995,  the  Company  recorded
commissions  expense  of  $343,290  related  to the  services  agreement.  As of
September 28, 1995, the Company terminated this services agreement.


(8) EMPLOYEE BENEFITS

     The Company's  independently  administered  self-insurance program provides
health   insurance   coverage  for   employees   and  their   dependents   on  a
cost-reimbursement basis. Under the program, the Company is obligated for claims
payments.  A stop loss  insurance  contract  executed with an insurance  carrier
covers  claims in excess of $35,000 per covered  individual  and $763,255 in the
aggregate  per year.  During the years ended  October 31,  1997,  1996 and 1995,
total claims  expense of  $872,582,  $876,481 and  $545,543,  respectively,  was
incurred,  which represents claims processed and an estimate for claims incurred
but not reported.


                                       29
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

     Effective January 1, 1994, the Company adopted a 401(k) retirement  savings
plan.  To become  eligible for the plan, an employee must complete six months of
service  and be at  least  21 years of age.  The  plan  allows  participants  to
contribute through salary reduction up to 6 percent of their annual compensation
on a pretax basis. Company matching  contributions are two dollars for every one
dollar  contributed  by an  employee  up to 4 percent of the  employees'  annual
compensation.  The Company made matching  contributions to the plan of $313,365,
$233,072  and  $205,011  for the years ended  October 31,  1997,  1996 and 1995,
respectively.

     The Company and its previously sole stockholder  adopted on March 1, 1996 a
stock  incentive plan which is called the Optical Cable  Corporation  1996 Stock
Incentive  Plan  (the  "Plan").  The Plan is  intended  to  provide  a means for
employees to increase their personal financial interest in the Company,  thereby
stimulating  the efforts of these  employees and  strengthening  their desire to
remain with the Company  through  the use of stock  incentives.  The Company has
reserved  4,000,000  shares of common stock for  issuance  pursuant to incentive
awards under the Plan.  At October 31,  1997,  there were  3,336,500  additional
shares  available for grant under the Plan. Under the Plan, stock options may be
granted at not less than fair  market  value on the date of grant.  The  options
have terms ranging from 8.75 to 10 years and vest 25 percent after two years, 50
percent  after three years,  75 percent  after four years and 100 percent  after
five years.

     The per share  weighted-average  fair value of stock options granted during
1997 and 1996 was $9.38 and $2.18, respectively,  on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions:  1997 -- expected  cash dividend  yield of zero percent,  risk-free
interest  rate of 6.08  percent,  expected  volatility  of 85.5  percent  and an
expected  life of 8.75  years;  1996 --  expected  cash  dividend  yield of zero
percent,  risk-free interest rate of 6.28 percent,  expected  volatility of 85.5
percent and an expected life of 10 years. 

     The Company  applies APB  Opinion  No. 25 in  accounting  for its Plan and,
accordingly,  no compensation  cost has been recognized for its stock options in
the financial  statements.  Had  compensation  cost for the Company's  Plan been
determined consistent with SFAS No. 123, the Company's net income (pro forma for
1996) and net income per share (pro forma for 1996)  would have been  reduced to
the SFAS No. 123 pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                YEARS ENDED OCTOBER 31,
                                                              ---------------------------
                                                                 1997            1996
                                                              -------------   -----------
<S>                                                           <C>             <C>
     Net income:
       As reported (pro forma for 1996 - unaudited)  ......   $ 7,807,146      $7,474,047
                                                              ===========      ==========
       Pro forma ..........................................   $ 7,638,186      $7,400,134
                                                              ===========      ==========
     Net income per share:
       As reported (pro forma for 1996 - unaudited)  ......   $     0.202      $    0.190
                                                              ===========      ==========
       Pro forma ..........................................   $     0.197      $    0.188
                                                              ===========      ==========
</TABLE>


                                       30
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

   Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
                                                                   NUMBER OF     WEIGHTED-AVERAGE
                                                                    SHARES        EXERCISE PRICE
                                                                   -----------   -----------------
<S>                                                                <C>           <C>
     Balance at October 31, 1995  ..............................          --          $    --
       Granted  ................................................     460,000            2.500
       Forfeited   .............................................     (18,000)           2.500
                                                                     -------
     Balance at October 31, 1996 (no options exercisable)       .    442,000            2.500
       Granted  ................................................     254,000           11.125
       Forfeited   .............................................     (32,500)           6.348
                                                                     -------
     Balance at October  31, 1997 (no options  exercisable, 
       424,000  options at  exercise price of $2.50 per
       share with remaining  contractual life of 8.5
       years, and 239,500 options at exercise price of
       $11.125 per share with remaining contractual life 
       of 8.5 years)   .........................................     663,500            5.613
                                                                     =======
</TABLE>

(9) BUSINESS AND CREDIT CONCENTRATIONS

     The Company provides credit,  in the normal course of business,  to various
commercial enterprises,  governmental entities and not-for-profit organizations.
Concentration of credit risk with respect to trade receivables is limited due to
the Company's  large number of customers.  The Company also manages  exposure to
credit risk through credit approvals,  credit limits and monitoring  procedures.
Management  believes  that  credit  risks at October 31, 1997 and 1996 have been
adequately provided for in the financial statements.

     For the years ended October 31, 1997, 1996 and 1995, 73 percent, 75 percent
and 76 percent,  respectively,  of net sales were from customers  located in the
United States, while 27 percent, 25 percent and 24 percent,  respectively,  were
from international  customers.  Europe accounted for approximately 10 percent of
net sales for the year ended October 31, 1997 while no foreign  geographic areas
accounted  for more than 10 percent of net sales for the years ended October 31,
1996 and 1995.  As of  October  31,  1997 and 1996,  there  were no  significant
amounts receivable from any one customer other than those described below.

     For the  year  ended  October  31,  1997,  22  percent  of net  sales  were
attributable  to two major  domestic  distributors.  The combined  related trade
accounts   receivable  for  these  distributors  at  October  31,  1997  totaled
approximately  $2,265,000. No single customer or other distributor accounted for
more than 5 percent  of net sales for the year ended  October  31,  1997.  As of
October 31, 1997, no single  customer or other  distributor  had an  outstanding
balance  payable to the  Company  in excess of 5 percent of total  stockholders'
equity.

     For the  year  ended  October  31,  1996,  12  percent  of net  sales  were
attributable  to one major  domestic  distributor.  The related  trade  accounts
receivable  for this  distributor  at October  31,  1996  totaled  approximately
$2,468,000.  No single customer or other  distributor  accounted for more than 5
percent of net sales for the year ended  October  31,  1996.  As of October  31,
1996, no single customer or other distributor had an outstanding balance payable
to the Company in excess of 5 percent of total stockholders' equity.

     For the  year  ended  October  31,  1995,  10  percent  of net  sales  were
attributable  to one major  domestic  distributor.  No single  customer or other
distributor  accounted  for more than 5 percent  of net sales for the year ended
October 31, 1995.


                                       31
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

(10) INCOME TAXES

     The Company  recorded a $114,045 net benefit for deferred income taxes upon
termination of the Company's S Corporation  status. The adjustment  reflects the
net deferred  income tax asset balance at March 31, 1996 in accordance  with the
provisions of Statement of Financial  Accounting  Standards No. 109,  Accounting
for  Income  Taxes,  which  requires  an asset and  liability  approach  for the
accounting  and financial  reporting of income taxes.  The components of the net
deferred tax asset at March 31, 1996 were  substantially the same as the October
31, 1996 components presented below.

     Income tax expense for the years ended October 31, 1997 and 1996 consists
of:


 YEAR ENDED OCTOBER 31, 1997      CURRENT       DEFERRED        TOTAL
-----------------------------   -------------   ----------   ------------
U.S. Federal  ...............   $ 3,654,654      $  78,224    $ 3,732,878
State   .....................       406,165         10,751        416,916
                                -----------      --------     -----------
 Totals .....................   $ 4,060,819      $  88,975    $ 4,149,794
                                ===========      ========     ===========


 YEAR ENDED OCTOBER 31, 1996      CURRENT        DEFERRED       TOTAL
-----------------------------   -------------    ---------   ------------
U.S. Federal  ...............   $ 2,556,601      $ (93,490)   $ 2,463,111
State   .....................       356,325        (12,587)       343,738
                                -----------      ---------    -----------
 Totals .....................   $ 2,912,926      $(106,077)   $ 2,806,849
                                ===========      =========    ===========

     Reported  income tax expense for the years ended  October 31, 1997 and 1996
differs from the "expected" tax expense,  computed by applying the U.S.  Federal
statutory income tax rate of 35 percent to income before income tax expense,  as
follows:


<TABLE>
<CAPTION>
                                                                 YEARS ENDED OCTOBER 31,
                                                             -------------------------------
                                                                1997             1996
                                                             --------------   --------------
<S>                                                          <C>              <C>
"Expected" tax expense   .................................    $ 4,184,929     $4,209,593
Increase (reduction) in income tax expense resulting from:
 Foreign Sales Corporation benefit   .....................       (164,459)       (98,473)
 State income taxes, net of federal benefits  ............        254,592        215,967
 S Corporation taxable income for the five months ended
   March 31, 1996  .......................................             --     (1,485,091)
 Net deferred income tax asset balance at March 31, 1996.              --       (114,045)
 Other differences, net  .................................       (125,268)        78,898
                                                              -----------     ----------
   Reported income tax expense ...........................    $ 4,149,794     $2,806,849
                                                              ===========     ==========
</TABLE>


                                       32
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

     The tax  effects of  temporary  differences  that give rise to  significant
portions of the Company's net deferred tax asset as of October 31, 1997 and 1996
are presented below:

<TABLE>
<CAPTION>
                                                                                      OCTOBER 31,
                                                                              ----------------------------
                                                                                1997            1996
                                                                              -------------   ------------
<S>                                                                           <C>             <C>
   Deferred tax assets:
    Accounts receivable, due to allowance for doubtful accounts   .........    $  115,662     $ 113,775
    Inventories, due to additional costs inventoried for tax purposes pur-
      suant to the Tax Reform Act of 1986..................................        64,671        91,781
    Self-insured health care costs, due to accrual for financial reporting
      purposes ............................................................        45,986        43,780
    Compensated absences due to accrual for financial reporting pur-
      poses ...............................................................        25,076            --
                                                                               ----------     ---------
      Total gross deferred tax assets  ....................................       251,395       249,336
   Less valuation allowance   .............................................            --            --
                                                                               ----------     ---------
      Net deferred tax assets .............................................       251,395       249,336
   Deferred tax liabilities:
    Plant and equipment, due to differences in depreciation and capital
      gain recognition  ...................................................       (64,381)      (49,227)
    Other receivables, due to accrual for financial reporting purposes  ...      (169,912)      (94,032)
                                                                               ----------     ---------
      Total gross deferred tax liabilities   ..............................      (234,293)     (143,259)
                                                                               ----------     ---------
      Net deferred tax asset, including current net tax asset of $81,484 in 1997
       and $155,304 in 1996, and noncurrent net tax liability of
       $64,382 in 1997 and $49,227 in 1996.................................    $   17,102     $ 106,077
                                                                               ==========     =========
</TABLE>

     Based on the Company's  historical and current pretax earnings,  management
believes  that it is more likely than not that the recorded  deferred tax assets
will be realized.


(11) RECAPITALIZATION AND INITIAL PUBLIC OFFERING

     During fiscal year 1996,  the Company's  Board of Directors  authorized the
filing of a registration statement for a public offering of the Company's common
stock. In connection with the public offering, the Board and the previously sole
stockholder  approved an increase in the number of  authorized  shares of common
stock from 50,000 shares to 50,000,000 shares, a  recapitalization  involving an
exchange  of all  outstanding  $1 par  value  common  stock  (596  shares)  on a
60,403-for-1  basis for no par value  common stock  (36,000,000  shares) and the
authorization of 1,000,000 shares of preferred stock, no par value,  issuable in
multiple series.

     On April 1, 1996,  the  Company  completed a public  offering of  2,675,416
shares of the  Company's  common  stock from which it received  net  proceeds of
approximately $5.5 million.

     In connection with the  recapitalization,  additional paid-in capital as of
March 31,  1996 has been  reclassified  to no par value  common  stock,  and the
amount of the undistributed taxable S Corporation earnings remaining as of March
31, 1996 has been reclassified to no par value common stock.


                                       33
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

     Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of  Financial  Instruments  ("SFAS  No.  107"),  requires  the  Company to
disclose  estimated  fair  values of its  financial  instruments.  SFAS No.  107
defines  the fair  value of a  financial  instrument  as the amount at which the
instrument could be exchanged in a current  transaction between willing parties.
The carrying amounts  reported in the balance sheet for cash, cash  equivalents,
trade accounts receivable,  other receivables,  notes payable,  accounts payable
and accrued  expenses  approximate  fair value because of the short  maturity of
these instruments.


(13) FUTURE ACCOUNTING CONSIDERATION -- EARNINGS PER SHARE

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial  Accounting  Standards No. 128,  Earnings per Share (SFAS No. 128).
SFAS No. 128  establishes  standards for computing and  presenting  earnings per
share (EPS) and applies to entities with publicly held common stock or potential
common stock.  SFAS No. 128 simplifies the standards for computing  earnings per
share previously found in APB Opinion No. 15, Earnings per Share, and makes them
comparable to  international  EPS  standards.  It replaces the  presentation  of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income  statement  for all  entities
with complex capital  structures and requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.

     Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average  number of common shares outstanding
for the period.  Diluted EPS reflects the potential dilution that could occur if
securities or other  contracts to issue common stock were exercised or converted
into common  stock or resulted in the  issuance of common stock that then shared
in the earnings of the entity.

     SFAS No. 128 is  effective  for  financial  statements  issued for  periods
ending after December 15, 1997,  including interim periods;  earlier application
is not permitted. SFAS No. 128 requires restatement of all prior-period EPS data
presented. It is not anticipated that SFAS No. 128 will have any material effect
on current or prior period EPS data presented by the Company.

                                       34
<PAGE>

                           OPTICAL CABLE CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
           YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995 - (CONTINUED)

(14) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The following is a summary of the unaudited quarterly results of operations
for the years ended October 31, 1997 and 1996:


<TABLE>
<CAPTION>
                                                            QUARTER ENDED
                                     ------------------------------------------------------------
   YEAR ENDED OCTOBER 31, 1997        JANUARY 31      APRIL 30         JULY 31        OCTOBER 31
----------------------------------   -------------   -------------   -------------   ------------
<S>                                  <C>             <C>             <C>             <C>
Net sales ........................    $12,491,311     $10,645,571     $14,285,834     $14,766,134
Gross profit .....................      5,351,665       4,292,588       5,616,809       6,315,098
Income before income taxes  ......      3,203,870       2,035,806       3,102,845       3,614,419
Net income   .....................      2,080,361       1,312,523       2,016,683       2,397,579
Net income per share  ............          0.054           0.034           0.052           0.062
</TABLE>


<TABLE>
<CAPTION>
                                                                QUARTER ENDED
                                         ------------------------------------------------------------
     YEAR ENDED OCTOBER 31, 1996          JANUARY 31      APRIL 30         JULY 31        OCTOBER 31
--------------------------------------   -------------   -------------   -------------   ------------
<S>                                      <C>             <C>             <C>             <C>
Net sales  ...........................    $10,342,472     $10,183,960     $10,862,064     $13,763,803
Gross profit  ........................      4,707,021       4,096,839       4,953,023       6,488,043
Income before income taxes   .........      2,774,994       2,252,228       2,983,232       4,016,955
Net income ...........................      2,774,994       2,068,288       1,858,823       2,518,455
Pro forma net income   ...............      1,709,397       1,387,372       1,858,823       2,518,455
Pro forma net income per share  ......          0.045           0.036           0.046           0.063
</TABLE>


                                       35
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

   None.


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


     The  information  contained  in the  Proxy  Statement  under  the  captions
"PROPOSAL  NO. 1,  ELECTION OF  DIRECTORS"  and  "EXECUTIVE  OFFICERS  AND OTHER
SIGNIFICANT  EMPLOYEES"  concerning  directors,   persons  nominated  to  become
directors,  executive  officers and certain other  significant  employees of the
Company is incorporated herein by reference. 


ITEM 11. EXECUTIVE COMPENSATION

     The  information  contained  in the  Proxy  Statement  under  the  captions
"EXECUTIVE  COMPENSATION",  and under the caption  "PROPOSAL  NO. 1, ELECTION OF
DIRECTORS"  concerning  compensation  of directors,  is  incorporated  herein by
reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  information  contained  in  the  Proxy  Statement  under  the  caption
"BENEFICIAL OWNERSHIP OF COMMON STOCK" is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information contained in the Proxy Statement under the caption "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" is incorporated herein by reference.


                                       36
<PAGE>

                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


(a) 1. Index of Financial Statements

       The  Company's  financial statements and related information are included
       in Part II, Item 8 of this Form 10-K on pages 20 through 35.


    2. Index of Financial Statement Schedules

       None.

    3. Index of Exhibits

     The  documents  filed as exhibits to this Form 10-K pursuant to Item 601 of
Regulation S-K are:


<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER       DESCRIPTION
------------   ----------------------------------------------------------------------------------
<S>            <C>
        3.1    Amended and Restated Articles of Incorporated of Optical Cable Corporation

        3.2    Bylaws of Optical Cable Corporation, as amended
 
        4.1    Form of certificate representing Common Stock
 
       10.1    Royalty Agreement,  dated November 1, 1993, by and between Robert
               Kopstein and Optical Cable Corporation

       10.2    Assignment of Technology  Rights from Robert  Kopstein to Optical
               Cable Corporation, effective as of October 31, 1994

       10.3    Employment Agreement by and between Optical Cable Corporation and
               Robert Kopstein, effective March 12, 1997

       10.4    Tax Indemnification  Agreement,  dated as of October 19, 1995, by
               and between Optical Cable Corporation and Robert Kopstein

       10.5    Optical Cable  Corporation  1996 Stock  Incentive  Plan (filed as
               exhibit 28.1 to the registrant's  Registration  Statement on Form
               S-8  filed  on  August  2,  1996   (file  no.   333-09433),   and
               incorporated herein by reference thereto)

       10.6    Loan Agreement, dated April 25, 1997, by and between Optical Cable Corpora-
               tion and First Union National Bank of Virginia

       10.7    Security Agreement, dated April 25, 1997, between Optical Cable Corporation
               and First Union National Bank of Virginia

         23    Consent of KPMG Peat Marwick LLP to incorporation by reference of
               independent  auditors'  report  included in this Form 10-K,  into
               registrant's registration statement on Form S-8

         27    Financial Data Schedule
</TABLE>


(b)  Reports on Form 8-K

     A Form 8-K dated  October 30, 1997 was filed  announcing  that the Board of
     Directors of the Company had  authorized the repurchase of up to $5 million
     of the Company's common stock.

(c)  Exhibits

     The  documents  set  forth in the  index of  exhibits  above  are  filed as
     exhibits to this Form 10-K pursuant to Item 601 of  Regulation  S-K and, if
     not incorporated by reference, are attached hereto.


                                       37
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          OPTICAL CABLE CORPORATION

Date: January 29, 1998                    By /s/ Robert Kopstein
                                            -------------------------
                                            Robert Kopstein
                                            Chairman of the Board
                                            President and Chief
                                            Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated as of January 29, 1998.



<TABLE>
<S>                                   <C>
                
     /s/ Robert Kopstein               Chairman of the Board, President, Chief Executive
---------------------------------        Officer and Director
      Robert Kopstein                    (principal executive officer)

    /s/ Luke J. Huybrechts             Senior Vice President of Sales and Director
---------------------------------
    Luke J. Huybrechts

    /s/ Kenneth W. Harber              Vice President of Finance, Treasurer, Secretary and
---------------------------------        Director
   Kenneth W. Harber                     (principal financial and accounting officer)
 
    /s/ Randall H. Frazier             Director
---------------------------------
     Randall H. Frazier

      /s/ John M. Holland              Director
---------------------------------
      John M. Holland

</TABLE>

                                       38